As an investor, my concern is what do I do with my money. If the Fed insists on inflating the currency, what do I do?

It may be correct to say that the conditions we are under do not lead to business growth, and therefore the growth in the value of stocks will probably be negative. But so what? Under the same conditions, keeping money in currency or bonds or the mattress will be disastrous to ones net worth.

TPC points to the last 10-15 years to make his point. OK, I can see that the Dow is below where it was some time a go, and the NASDAQ is down significantly from its high of 9+ years ago. However, if one had held one’s stash in US Treasuries for the last 10 years, one would have done quite well. Is that your point? Is that what I should do now? I don’t think that is what you are advising.

So if I cannot hold cash in US Treasuries or dollar denominated bonds due to inflation risks, and the Euro is risky, and the yen is riaksy too, and the yuan is tied by the Chinese authorities to the dollar, and I cannot afford to keep an oil tanker out in the bay in front of my house, and I don’t have a vault big enough for all the silver, and I don’t want to stand guard over bullion 24×7, what do I do?

It seems academically correct to say, stocks are a bad bet. But there is not much left to do other than become a hermit or join a militia someplace. So I prefer to buy stocks in what I regard as an intelligent manner.

BTW, I’ve been doing so quite successfully since 1996. Right now I have my stash in gold & silver miners, oil companies, Canadian & Aussie dollars, Chinese yuan and some Canadian utilities for cash flow. Plus some alternative energy stocks for popcorn & entertainment. I’m not sure what else to do.

Seems like a good time to keep a nimble outlook.

http://www.telegraph.co.uk/finance/financetopics/recession/6190818/US-credit-shrinks-at-Great-Depression-rate-prompting-fears-of-double-dip-recession.html

What struck me particularly was your phrase ‘and the banks have grown larger in what has to be the most incredible power grab in modern economic times.’

Over at Jesse’s cafe Americain (here) there is a good article on Central Banks with the conclusion: ‘We think there is a reason that the Federal Reserve, for instance, is resisting the Congressional move for a thorough audit, and it has little to do with a professed concern for the destabilization of banking institutions. We believe, as with Iceland, that central banking is infested with private dealings in millions and even billions of dollars. How could it be otherwise?’

With the events that have occurred in the USA in the last decade one doesn’t need a tin-foil hat to begin to wonder whether this is more than a power grab but a carefully designed, non-violent, coup d’etat.

That is the money multiplier. To make things really simple, it basically shows whether money is being loaned out and thus sent out into the economy – whether it is being “multiplied”. http://www.businessdictionary.com/definition/money-multiplier.html

I am not implying that stocks can’t soar in an environment like this. In fact, I think quite the opposite. But the boom bust cycle of the last 20 years has proven that money printing does not create sustainable or organic economic growth. And that is the only thing that a durable bull market can be built on. The last 15 years of stock returns are a great example. Anyone arguing your position has been wrong for well over a decade.

Can you please explain the M1 chart with 50% equity rally circle? I understand that the ratio needs to be >1 in order for every new dollar (debt – printing press) to have effect in the real economy. But I am not sure how is it helping the equity rally.

Thank you and I really appreciate your help.

Where else will all this money go? Not into treasuries or CRE. So most likely it will go into stocks or other assets, like oil, copper, mining, pipelines and so on.

I disagree with TPC.

He says the printing press has not proven to have any long term or sustainable positive effect on stocks. I believe the opposite is true. As the Zimbabwe currency was debased, the stock market soared. In Weimar Germany, if you held cash, you were wiped out. If you put your cash into Siemens stock, you came out ok.

What we are seeing now, IMHO, is money finding its way out of cash and bonds and into stocks of companies that own assets that will survive inflation.